Money & Markets Week Ahead for the week of November 15, 2020: Will the tech sell-off continue?
Investors will also see more earnings and economic data released over the course of the next five days.
Here are some things investors should watch on Wall Street this week:
The Tech Sell-Off
Last week was a rough week for tech stocks, as investors pulled out of the sector and into others that could benefit from a COVID-19 vaccine.
If you missed it, Charles Sizemore and I discussed the tech sell-off during an episode of The Bull & The Bear podcast.
The sell-off was spawned from the announcement of successful trials for a COVID-19 vaccine.
That moved investor sentiment toward other stocks that have been hit hard by virus lockdowns (think entertainment and travel).
The big question for investors is, how long will the sell-off in tech last?
There’s no clear answer to that. But as we keep getting good news about potential vaccines, that rotation away from tech and into other sectors will likely continue.
As we pointed out in the podcast, it’s not that there is anything wrong with the sector. It’s simply a rotation into others that could provide short-term growth potential as vaccine developments continue to be positive.
On the IPO Front
There are a few initial public offerings (IPO) scheduled for this week.
One of the bigger IPOs on the calendar is an affordable housing real estate investment trust (REIT) operated by Aspire Real Estate Investors.
It plans to trade on the New York Stock Exchange under the ticker ASPI.
The IPO: According to Renaissance Capital, the company’s IPO terms are to sell 15 million shares at $20 with the hope of raising $300 million.
The company also plans to bring in an additional $27 million in private placements to senior management and other investors.
At the price point of $20 per share, Aspire would see a market value of around $327 million. And the company does plan to pay a dividend, as most traditional REITs do.
What is it: The REIT will focus on acquiring existing income-producing and affordable workforce multifamily properties. Its portfolio will start by containing nine multifamily projects — six of which are located in “Opportunity Zones,” or economically distressed communities.
The finances: According to its filing, ASPI earned $23 million in revenue for the 12 months ending Sept. 30, 2020.
Bookrunners on the deal include Morgan Stanley, B. Riley FBR, Wells Fargo Securities, BMO Capital and KeyBanc Capital Markets.
When it launches: The IPO for Aspire is expected to launch on Wednesday.
Another Full Week of Earnings
It’s another busy week on the earnings front.
This week, big-box retailers like Walmart Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT) will report earnings.
Additionally, cannabis companies Planet 13 Holdings Inc. (OTC: PLNHF), Curaleaf Holdings Inc. (OTC: CURLF) and Trulieve Cannabis Corp. (OTC: TCNNF) will report.
In terms of retail, the S&P 500 Consumer Staples Index has seen a strong rebound from its March 2020 lows.
Consumer Staples Index Jumps 21% Since March
In the last quarter, Walmart reported earnings of $6.48 billion, or $2.27 per share. That was up from the $1.26 per share in earnings it reported the year before.
The consensus forecast is for Walmart to turn in earnings of $1.12 per share for the third quarter, but I suspect it will be much higher than that.
Target also had a great second quarter, reporting earnings per share of $3.35 — an 84% increase from the $1.82 it reported in 2019.
The consensus Wall Street forecast for Target’s earnings is around $1.53 for the quarter, but, like Walmart, I would not be surprised to see that in the $2 range.
As for cannabis, Planet 13 is expected to report a very strong quarter.
Its preliminary estimates suggest quarterly revenue of $22.8 million — a 110% increase over the previous quarter — with a gross margin of around 50%.
Curaleaf reported second-quarter earnings of $117.5 million — a record for the company and a 142% increase from the same quarter a year ago.
I would suspect another big quarter of earnings for Curaleaf with the potential for losses of between $1 million and $2 million — considerably less than the $24.5 million it reported in the second quarter of 2019.
Trulieve, on the other hand, reported a net income of $14 million in the last quarter, or $0.12 per share — a drop from the $15 million the company reported in the previous quarter.
The company still raised its full-year sales guidance to between $465 million and $485 million — up from the previous guidance of $380 million to $400 million.
I think the company will see better sales performance from the third quarter as its expansion into the Florida market continues to pay off, but the guidance may be a bit too high.
And don’t forget to go to our YouTube channel and watch our weekly Marijuana Market Update.
Money & Markets Week Ahead: Data Dump
Investors will start the week with the Empire State Manufacturing Index for the month of November.
This is a monthly survey conducted by the Federal Reserve Bank of New York and gauges manufacturing activity in the state of New York.
In October, the index fell seven points to 10.5, indicating a slower pace of growth than in September.
The survey showed an increase in new orders and shipments, but unfilled manufacturing orders continued to decline.
Those surveyed said they have high optimism that conditions would improve over the next six months, but that optimism was slightly lower than in September.
Analysts project the index to jump to between 12 and 13.
Investors will get a look at retail sales on Tuesday as the U.S. Census Bureau will release its year-over-year and month-over-month data for October.
For September, retail sales jumped 1.9% from August, signaling a slight uptick in activity. September’s figures were 5.9% higher than the same month a year ago.
On Tuesday, the National Association of Home Builders will release its Housing Market Index reading for the month of November.
Last month, the index moved up to 85. A reading of 50 and above indicates expansion in the market, while 49 and lower signals a contraction.
Analysts expect the index to be unchanged for the month of November.
On Thursday, the Federal Reserve Bank of Philadelphia will release its Manufacturing Index for November.
The index rose 17 points to 32.3 in October — the fifth consecutive month of positive readings — indicating an improvement in the market.
Future employment also moved up while current employment ratings remained relatively flat.
Expectations are for the index to drop slightly.
The Labor Department will provide investors with another weekly glimpse into employment in the U.S. on Thursday.
Last week, the total number of jobless claims was 709,000 — well below the 740,000 claims forecast by Wall Street.
The data indicated that more than 21 million Americans were still collecting unemployment benefits, but that number is gradually declining.
To finish off the Money & Markets Week Ahead, here’s a look at some of the key earnings reports due out this week:
JD.com Inc. (Nasdaq: JD)
Baidu Inc. (Nasdaq: BIDU)
Palo Alto Networks Inc. (NYSE: PANW)
Planet 13 Holdings Inc. (OTC: PLNHF)
Walmart Inc. (NYSE: WMT)
Home Depot Inc. (NYSE: HD)
Curaleaf Holdings Inc. (OTC: CURLF)
Daqo New Energy Corp. (NYSE: DQ)
Trulieve Cannabis Corp. (OTC: TCNNF)
NVIDIA Corp. (Nasdaq: NVDA)
Target Corp. (NYSE: TGT)
TJX Companies Inc. (NYSE: TJX)
NetEast Inc. (Nasdaq: NTES)
Workday Inc. (Nasdaq: WDAY)
Canadian Solar Inc. (Nasdaq: CSIQ)
Macy’s Inc. (NYSE: M)
Foot Locker Inc. (NYSE: FL)
Hibbett Sports Inc. (Nasdaq: HIBB)
That’s all for this week.
Until next time…
Research Analyst, Money & Markets
Matt Clark is the research analyst for Money & Markets. He’s the host of our podcast, The Bull & The Bear, as well as the Marijuana Market Update. Before joining the team, he spent 25 years as an investigative journalist and editor — covering everything from politics to business.